Construction

Building your own home? We fund each stage as you build.

Money is released in stages — foundation, framing, lock-up, completion — to match your builder's invoices. Borrow up to 80% of the finished home's value. Works for owner-builders too.

3–5 building stagesUp to 80% of finished valueOwner-builders welcomeBuy lot + build9–18 month build windowAuto-converts to regular mortgage

5-star rated| FSRA #13737| 5-min pre-qualification

Written by the Mortgage Squad Advisors Editorial Team · Reviewed by the Principal Broker, FSRA #13737 · Updated June 2026

Building your own home?

We fund each stage as you build.

Money is released in stages — lot purchase, framing, lock-up, and completion — to match your builder's invoices.

Build progressLot

LotFoundationFramingLock-upDrywallCompletion

4-6

Draw stages (typical)

9-18mo

Construction window

65-80%

LTC at draw

Auto

Roll to take-out

Get pre-approved Draw schedule

Maya · AI · 24/7

How do construction draws work?

5-star rated| FSRA #13737| 50+ langs

Construction financing has its own playbook: lender selection, builder qualification (or owner-builder process), draw schedule, holdback management, and conversion to a regular mortgage at occupancy. We coordinate everything.

What you get

Why Canadians choose Mortgage Squad Advisors.

Progress advances at each stage (3-5 typical)

Convert to regular mortgage at completion

Owner-builder programs available

Custom build, lot purchase + build, or major reno

We coordinate with your builder & lawyer

Up to 80% LTV on completed appraised value

Insured options for primary residence builds (5-10% down)

Rate hold during construction (most lenders)

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How it works

Three simple steps, no pressure.

Pre-Approval + Builder Vetting

We confirm you qualify on completed value. Lender vets your builder (or your owner-builder plan).

Draw Schedule

Funds release at agreed stages. Holdback (typically 10%) released at completion + 45 days.

Convert at Occupancy

Final advance funds. Your construction mortgage converts to a regular (5-yr fixed or variable) at occupancy.

Run the math first

How does a draw (progress-advance) construction mortgage actually work?

A draw mortgage releases your approved funds in stages rather than as one lump sum. Typical advances align with construction milestones — foundation, lock-up (framing, roof, windows), drywall and interior finishing, then completion — and each release is triggered only after a lender-ordered inspection or appraisal confirms that stage is genuinely finished. The practical upside: you pay interest only on the funds actually advanced, so your carrying cost early in the build (when little has been drawn) stays low and climbs as the home nears completion. Your builder invoices against the schedule, the lawyer disburses, and we coordinate inspection timing so trades aren't left waiting on cash. Because every lender structures draws differently — 2-stage on small projects, 4–5 on full custom builds — matching the schedule to your cash flow is where broker selection matters. Explore lot or land financing if you're buying the site first.

Completion (as-complete) appraisal vs cost-to-complete — how is my loan sized?

Lenders don't size a construction loan against today's empty lot; they size it against the home's projected finished value. With an as-complete appraisal, an appraiser reviews your plans, specs, and budget, then estimates what the property will be worth once built — and your loan is generally capped at up to 80% of that completion value. The cost-to-complete view runs in parallel: lenders compare your hard and soft construction costs (materials, labour, permits, site work) against remaining funds at each draw to confirm the project can actually finish on budget. If either number falls short, the loan shrinks or requires more equity. This is why a realistic, itemized budget with a contingency line is worth as much as the appraisal. We match your file to a lender whose appraisal and budget tolerances fit your build, drawing on relationships with 50+ lenders including specialty and private sources.

What is the construction holdback and why does it affect my cash flow?

Provincial construction-lien law requires a portion of each advance — commonly around 10%, though it varies by province — to be held back rather than paid out. Under Ontario's Construction Act, for example, that holdback is retained through the lien period (substantial completion plus the statutory window) so that unpaid subtrades and suppliers have recourse before final funds are released. For you, the holdback means the last slice of each draw doesn't arrive when the work does; it's released only after the lien period passes with no liens registered. Plan for this gap. If your builder expects payment in full at a milestone but the lender retains 10%, you may need to cover the difference temporarily. We flag the holdback math up front, coordinate with your lawyer on lien-period timing, and where a short gap appears, point to bridge financing so trades stay paid and your schedule holds.

When does interest-only become a permanent mortgage, and how do I lock it?

During the build you carry an interest-only payment on advanced funds — manageable while you may also be paying rent or another mortgage. At completion (typically occupancy or substantial completion), the final advance funds and the construction facility converts to a permanent take-out mortgage — a standard fixed or variable term that amortizes principal and interest like any other. The conversion isn't automatic peace of mind, though: rate exposure is the risk. Many lenders let you secure a rate hold during construction so the take-out rate is protected against market moves over a 9–18 month window; others price the conversion at completion. We confirm which structure your lender uses before you commit, so a long build doesn't leave your finished home exposed to a higher rate. If your completion timing slips, we can also line up interim options to bridge to the take-out.

Self-build vs builder-contract: deposits, contingencies, and where alt financing fits?

A registered builder-contract build is the smoothest path — lenders trust a fixed-price contract and a vetted contractor. Owner-builder (self-build) files are doable but demand more: detailed budgets, proof you can manage trades, and tighter inspection scrutiny, since the lender carries more risk without a general contractor. Either way, expect to fund deposits and early site costs yourself before the first draw lands, and build a contingency of roughly 10–15% into your budget — change orders and overruns are the norm, not the exception. When a draw timing gap, a budget overrun, or an owner-builder profile pushes a file outside a bank's box, private and alternative financing bridges it. As an FSRA-licensed brokerage (#13737) with complex-draw expertise, disclosed fees, and service in 50+ languages, we structure the file most banks decline. Major remodels can also route through a renovation mortgage.

FAQ

Common questions, answered.

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How many draws are typical?

3-5: foundation, framing/lockup, drywall/finishing, completion (+ holdback release). Some lenders offer 2-stage draws on smaller renos.

Do I pay interest during construction?

Yes, on the drawn balance only. Most clients carry the interest-only payment monthly.

Do I need a contractor?

Most lenders prefer a registered contractor. Owner-builder programs exist but require more documentation and inspection.

Can I include the lot purchase?

Yes — combined lot + build mortgages are common. Lot is funded first; build draws follow.

What's a holdback?

A construction lien holdback (typically 10%) is held back per Construction Lien Act for 45 days after substantial completion. Released after the holdback period if no liens registered.

Can I do a major reno on this product?

Yes — major renos that change the building footprint or systems often qualify. Cosmetic renos use a refinance + line of credit instead.

What's the rate during construction?

Slight premium over 5-yr posted (typically 5-yr fixed +25-50bps) during the draw period. Converts to standard rate at occupancy.

What if my build goes over budget?

Common issue. We can sometimes increase the construction mortgage if completed value supports it. Otherwise, a HELOC or short-term private supplement works.

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